Tax cap talks alive

GOP Senate open to ideas as Assembly Democrats weigh sunset, other moves

By RICK KARLIN Capitol bureau

Published 12:01 am, Thursday, May 19, 2011

ALBANY -- Gov. Andrew Cuomo's call for a 2 percent property tax cap is inching forward and evolving at the same time.

In the latest development, Senate Republican Majority Leader Dean Skelos has softened his earlier position against revisiting an altered version of the cap, which his house passed earlier in the year.

"The governor asked me potentially to look at changes ... and I said of course I would," Skelos said Wednesday. "If the governor sends me a proposed change, I'm going to look at it."

Assembly Democrats, meanwhile, are looking at a sunset provision and possible exemptions to the cap as a compromise.

One of their proposals would allow municipalities and school districts to exempt or exclude part of their pension cost increases from the cap -- but only if they keep hiring in check.

"We have to have some flexibility in it for local governments, including school districts, and certainly pensions are a big cost item over which they have little control," said Assembly Majority Leader Ron Canestrari, a Cohoes Democrat.

A pension exemption, Canestrari said, could be indexed or pro-rated to the size of a municipality's workforce going forward.

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If a municipality or school district decides to step up their hiring, the exemption could be phased out or eliminated, shifting the cost to the locality.

Both Canestrari and Skelos' statements suggest the intensity of behind-the-scenes negotiations between the governor's office and lawmakers as they enter the final month of the legislative session, which ends June 20.

Skelos' willingness to revisit the original bill stands in contrast to his insistence in recent weeks that the Senate has already voted for the governor's cap, and to vote on another version would amount to watering down the bill.

Previously, Skelos' rhetoric was devoted to calling for action by the Assembly, which has yet to take up the original tax cap bill.

The Cuomo cap would limit tax levy increases by municipalities and school districts to 2 percent per year or the rate of inflation, whichever is lower. Residents of a given municipality or school district, however, could override the cap with a 60 percent majority.

Education and municipal officials say their services would have to be gutted if they had to operate under a 2 percent cap and meet rising pension costs, which are financed in part by local taxpayers.

Rising pension costs will be making up significant portions of local tax hikes in coming years, as baby boomers retire and returns on the state's retirement funds drop from historic highs.

Comptroller Tom DiNapoli, for example, has predicted that the percentage of their payrolls local governments will have to pay toward pension benefits will rise from an average of 11.9 percent to 16.3 percent in 2012.

The trouble: Exempting such a sharply rising cost would render a 2 percent tax cap meaningless, say critics such as E.J. McMahon, director of the fiscally conservative think tank The Empire Center. "I don't think anybody is going to fall for that," he said.

His group has calculated that the local share of rising teacher pension costs alone could account for an average 3.5 percent in annual tax hikes over the next five years.

The trouble is, the pensions are constitutionally guaranteed and localities can't get out from under them, Canestrari said. He stressed the talks about possible exemptions are in the early stages, and it would be "optimistic" to expect a bill before the end of the month.

Likewise, Skelos said that the governors office hasn't sent him any new tax cap bills.